M&A Term Sheets 101
•Download as PPTX, PDF•
5 likes•495 views
Negotiating an M&A term sheet is always challenging. Certainly, deal-making in a business environment driven by the global pandemic requires a fresh look at the rules of the game. These slides cover: - Negotiating a purchase price - Deal structure - Employment agreements - Earn-outs And much more..
Recommended
More Related Content
Similar to M&A Term Sheets 101
Similar to M&A Term Sheets 101 (20)
More from Louis Lehot
More from Louis Lehot (19)
Recently uploaded
Recently uploaded (20)
M&A Term Sheets 101
- 1. M&A TERM SHEETS 101 July 14th, 2020
- 2. PANELISTS Louis Lehot Founder Natasha Allen Founding Partner Vitaly Golomb Managing Partner Brian McAllister Principal
- 3. AGENDA 1. Term Sheets – Pros and Cons 2. Binding or Non-binding? 3. Content of the Term Sheet 4. Purchase Price 5. Deal Structures 6. Earn-outs 7. Special Issues 8. Tips and Tricks
- 4. 1. TERM SHEETS – PROS AND CONS Benefits: • Written confirmation of terms agreed in principle • Outline timetable and obligations of the parties • Bind exclusivity of negotiations • Identify deal-breakers at the outset • Focus negotiations • Enhance deal stability and commitment
- 5. 1. TERM SHEETS – PROS AND CONS Disadvantages: • Costs • Impair momentum • Unintentional creation of binding obligations or duties to negotiate in good faith? • Does it weaken your negotiating position?
- 6. 2. BINDING OR NON-BINDING? Binding Obligations: • Exclusivity • Confidentiality • Fees and expenses • Due diligence • Entire term sheet?
- 7. 2. BINDING OR NON-BINDING? Unintentional Binding Obligations: (unless disclaimed) • Partial performance? • Duty to negotiate in good faith? • Remedies for breach?
- 8. 2. BINDING OR NON-BINDING? Be explicit about what binds and what doesn’t!
- 9. 3. CONTENT OF THE TERM SHEET • Parties • Structure (asset acquisition, merger, share purchase or simple license?) • Purchase price • Holdbacks? • Escrows? • Earn-outs? • Working capital or other adjustments? • Assumptions
- 10. 3. CONTENT OF THE TERM SHEET • Reps, warranties, covenants, indemnification • Rep & warranty insurance • Ancillary agreements • Closing conditions • Key dates
- 11. 3. CONTENT OF THE TERM SHEET • Allocation of fees and expenses • Scope of due diligence • Confidentiality • Exclusivity • Tax treatment
- 12. 4. PURCHASE PRICE • Cash, stock, other • How to value non-cash consideration • If based on assumptions about revenue, EBITDA or pipeline, spell it out
- 13. 4. PURCHASE PRICE • Quality of earnings? • Closing adjustments • holdbacks • escrow • working capital • RWI • Post-closing adjustments • working capital • earn-outs • Allocation of basis • Claims for indemnification • Set-off
- 14. 5. DEAL STRUCTURES • Asset acquisition • License • Merger • Share purchase • Other
- 15. 6. EARN-OUTS • Bridging gaps in perceived valuation • Post-closing covenants • Running the business • Handling claims • Dispute resolution
- 16. 7. SPECIAL ISSUES • Management carve-out plans • Treatment of options – contribution, acceleration and assumption • Equity rollovers • Third party conditions (customers, suppliers, regulators, licensors)
- 17. 7. SPECIAL ISSUES • Exclusivity, no shops, no talks, fiduciary outs • Break fees and reverse break fees • Special indemnities
- 18. 8. TIPS AND TRICKS • State the principle and defer the details • Special teams and issues • Identify key closing conditions • Allocate responsibilities
- 19. 8. TIPS AND TRICKS • Not exhaustive • State assumptions • Clarify with examples • Delineate binding vs. non- binding provisions • Consider public disclosures
- 20. Q&A Louis Lehot Founder Natasha Allen Founding Partner Vitaly Golomb Managing Partner Brian McAllister Principal
- 21. Vitaly Golomb Managing Partner www.gscap.co v.golomb@gscap.co THANK YOU! For More Information: Natasha Allen Founding Partner allenhatcher.com natasha@allenhatcher.com Louis Lehot Founder l2counsel.com louis.lehot@l2counsel.com Brian McAllister Principal mblcounsel.com brian@mblcounsel.com